Have you ever thought about the impact of employees on a company’s productivity? We measure productivity as barrels of oil produced, per day, per employee. A decrease in workers would mean an increase in productivity. However, if the workers who remain aren’t as skilled or knowledgeable, productivity can decrease. Makes sense, right? Let’s take a look what has happened in Canada’s oil and gas industry.
From 2010 to 2014, oil and gas companies experienced recruitment challenges in Canada as they competed with one another for skilled and experienced people in a fast expanding industry. This was particularly challenging when it came to hiring technical workers. Companies adopted innovative, technological improvements to offset some of the increased spending and employment growth. But, overall productivity declined by 6% during the four years.
During the downturn, in 2015 and 2016, oil and gas employment decreased by 25%. In many cases staff reductions created an increased work load for the remaining employees, as well as the elimination of discretionary work that wasn’t tied to operations. Training efforts were also reduced. In the short-term productivity improved by 32% due to production increases. The long-term effects of the layoffs are just starting to be revealed.
From 2017 to 2021 we expect significant changes in the demographics of the workforce that will impact productivity of the oil and gas industry, which is expected to grow by 2% over the period. Here’s why:
- Between 22,000 and 23,000 workers are eligible for retirement. That’s approximately 13% of the workforce – and most of the retirements are expected in occupations with key knowledge and skills. A loss of experience and skills, including people in supervisory and managerial roles, may cause a decrease in innovation.
- Industry may not be able to attract and retain the best talent. The layoffs, environmental concerns and a perceived lack of stability is likely to have an impact on the attractiveness of the industry to potential employees. The services sector is already experiencing difficulties in attracting experienced workers back to the industry, and, as industry recovers, we expect new or less experienced workers will be hired to fill the gaps. Hiring new workers, even those with experience, results in a period of lower productivity as they gain organizational knowledge.
- Investments will need to be made in training. With new and returning workers, safety and operational certification and new technology training is expected.
- Employees who have stayed in the industry may have been overworked and be prone to burnout.
- Companies may be reluctant to jump back on the hiring train. With unpredictable oil and gas prices and difficulty recruiting experienced, skilled workers – companies may introduce technological solutions that reduce their labour requirements and improve productivity.
For more on this topic, check out our report, Labour Productivity in Canada’s Oil and Gas Industry: A Discussion of Historical Trends and Future Implications.